Legg Mason’s New CEO: Stay the Course?

By Brendan Conway

Meet Legg Mason’s (LM) new boss, same as the interim boss. The asset manager said this morning it is appointing interim chief executive Joseph A. Sullivan as president and CEO effective April 1, bringing what one analyst termed an “anti-climactic” finish to a months-long search.

The analyst, Citigroup’s (C) William Katz, predicted that investors may view the pick as a letdown, although you don’t see that in the stock price this morning. Legg’s shares are rising in line with the broader stock market. Shares are ahead by 8.8% YTD, currently trading at $27.99.

After a few years of sharp fund outflows, will Sullivan — whom Katz credits with a “solid track record” — bring the big changes some investors have anticipated? Or will his course be more moderate?

“[T]he search has been ongoing since the prior CEO, Mr. Mark Fetting, stepped down in the Fall of 2012,” Katz wrote to clients last night. Pensions & Investments reported the news Tuesday evening, ahead of this morning’s announcement. “[I]nvestors may view the lack of fresh perspective as potentially disappointing, and/or reinforcing concerns over the complexity of the platform,” Katz wrote.

The other factor: “Strident” investors have bought this stock lately in hopes of rising the activism of board member Trian Fund Management’sNelson Petz into “more radical restructuring” and better times for shareholders. Selecting an insider may not be on those investors’ wish list.

From Citi’s Katz, before the official announcement:

Solid Track Record — To be fair, Mr. Sullivan has overseen SIV resolution, led cost cutting efforts, and spearheaded recent global distribution efforts – and likely has a solid relationship with key affiliates. In our minds, if the news is accurate, we would not be surprised, as Mr. Sullivan’s commentary post C4Q12 results seemed particularly pointed around strategic direction and the firm has completed a recent deal under his temporary leadership.

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